Sustainable Sourcing and Climate Change: How are Measures Changing?

Sustainable sourcing practices, aligned with companies’ environmental, health and safety (EHS) goals and corporate social responsibility initiatives, are taking on greater prominence as part of a broader global discussion on climate change. A UN Climate Action Summit, held in New York this week, is drawing further attention to what is expected of companies.

UN Climate Action Summit

The United Nation (UN) Climate Action Summit, which was held on September 23, 2019, ahead of the UN General Assembly, brought together governments, the private sector, civil society, local authorities and other international organizations to develop solutions in several areas to address the impact of climate change. The UN Secretary General has prioritized six action portfolios, which are recognized as having high potential to curb greenhouse gas emissions and what the UN characterizes as “increased global action on adaptation and resilience.” The action points, as outlined by the UN, are:

  • Finance: mobilizing public and private sources of finance to drive decarbonization of all priority sectors and advance resilience;
  • Energy transition: accelerating the shift away from fossil fuels and towards renewable energy, as well as making significant gains in energy efficiency;
  • Industry transition: transforming industries such as chemicals, oil and gas, steel, cement, and information technology;
  • Nature-based solutions: reducing emissions, increasing sink capacity and enhancing resilience within and across forestry, agriculture, oceans and food systems, including through biodiversity conservation, leveraging supply chains and technology;
  • Cities and local action: advancing mitigation and resilience at urban and local levels, with a focus on new commitments on low-emission buildings, mass transport and urban infrastructure; and resilience for the urban poor;
  • Resilience and adaptation: advancing global efforts to address and manage the impacts and risks of climate change, particularly in those communities and nations most vulnerable.

In addition, there are three additional key areas:

  • Mitigation strategy: to generate momentum for ambitious nationally determined contributions (NDCs) and long-term strategies to achieve the goals of the Paris Agreement, an agreement within the UN Framework Convention on Climate Change that deals with greenhouse-gas-emissions mitigation, adaptation, and finance;
  • Youth engagement and public mobilization: to mobilize people worldwide to take action on climate change and ensure that young people are integrated and represented across all aspects of the UN Climate Action Summit, including the six transformational areas;
  • Social and political drivers: to advance commitments in areas that affect people’s well-being, such as reducing air pollution, generating decent jobs, and strengthening climate adaptation strategies and protect workers and vulnerable groups.

The Summit was designed to showcase government, business, and civil society efforts to increase their commitments under the Paris Agreement and work toward reducing emissions to essentially zero by mid-century. Many of the more than 70 key announcements made at the Summit showcase the concrete ways in which countries can better adapt to climate change and cut emissions while getting the necessary technical and financial support many of them need.

The emphasis on actionable goals was unscored by UN Secretary-General António Guterres, in his comments at the summit. “The best science, according to the Intergovernmental Panel on Climate Change, tells us that any temperature rise above 1.5 degrees will lead to major and irreversible damage to the ecosystems that support us,” he said in a September 23, 2019 statement. “Science tells us that on our current path, we face at least 3-degrees Celsius of global heating by the end of the century. The climate emergency is a race we are losing, but it is a race we can win. This is not a climate talk summit. We have had enough talk,” he added. “This is not a climate negotiation summit. You don’t negotiate with nature. This is a climate action summit.”

New initiative for businesses

Several new private–public initiatives and corporate pledges, with some including company participation from the chemical and pharmaceutical industries, were launched at the Summit to meet the actionable goals set forth by UN Secretary-General Guterres.

The Leadership Group for Industry Transition. The Leadership Group for Industry Transition was launched to meet environmental goals in hard-to-decarbonize and energy-intensive sectors. The group is composed of both countries (Argentina, Finland, France, Germany, India, Ireland, Luxembourg, the Netherlands, South Korea, Sweden, and the UK). Among the companies participating are DSM (Heerlen, The Netherlands-based chemical company); Dalmia Cement (India-based cement company); Heathrow Airport (UK-based, transportation); LKAB (Swedish mining company); Mahindra Group (Mumbai, India-based multinational conglomerate); Royal Schiphol Group (Amsterdam-based transportation company); Scania (Swedish manufacturer of commercial vehicles); SpiceJet (India-based airline); SSAB (Swedish-Finnish steel company); ThyssenKrupp (German multinational conglomerate with focus on industrial engineering and steel production); Vattenfall (Swedish power company).

This global initiative will be supported by the World Economic Forum, the Energy Transitions Commission, Mission Innovation, Stockholm Environment Institute, and the European Climate Foundation among many others in a public-private effort to ensure heavy industries and mobility companies can find a workable pathway to deliver on the Paris Agreement.

Business Ambition for 1.5 °C—Our Only Future Initiative.  The Business Ambition for 1.5 °C—Our Only Future initiative consists of a broad coalition of companies that have committed to set science-based targets through the Science Based Targets initiative, which independently assesses corporate emissions reduction targets in line with what climate scientists say is needed to meet the goals of the Paris Agreement. The coalition, which consists of 87 companies with a combined market capitalization of $2.3 trillion, is further designed to engage business peers, suppliers, customers, investors, policymakers, civil society organizations, and other stakeholders in this goal.

Those business leaders who sign on confirm that within the next 24 months, their company intends to calibrate decarbonization plans with the goal to limit warming to 1.5 °C through one or both of the following options: (1) 1.5°C science-based targets that align greenhouse-gas emission reduction targets, across all relevant scopes, with 1.5 °C emissions scenarios; and (2) net-zero commitment, which sets a public goal to reach net-zero emissions by no later than 2050 in line with 1.5°C scenarios and interim quantitative targets, consistent with this goal, and in line with the criteria and recommendations of the Science Based Targets initiative. Companies joining the campaign are expected to formally commit, if they have not already done so, to set science-based targets through the Science Based Targets initiative (SBTi) and to subsequently submit their targets for validation. To date, the SBTi has verified the targets of more than 200 companies. In April 2019, the SBTi released new target validation resources to enable companies to set targets consistent with keeping warming to 1.5 °C. Among companies signing this pledge are AstraZeneca, Novo Nordisk, DSM, Novozymes, and Croda.

The Getting to Zero Coalition. The Getting to Zero Coalition is a shipping value-chain partnership between the Global Maritime Forum, the Friends of Ocean Action, and the World Economic Forum to build on the call to action to support decarbonization. The coalition is composed of more than 50 leaders across the maritime industry, financial institutions and other stakeholders in the shipping value chain. It also builds on the Poseidon Principles, a global framework for climate aligned for shipping launched in June 2019.

The coalition is focused on the development of a roadmap for the entry of commercially viable zero-emissions vessels (ZEVs) to meet the larger goal of reducing greenhouse-gas emissions from shipping by at least 50% by 2050 and to make the transition to full decarbonization possible through the starting of the entry of ZEVs into the global fleet by 2030, with additional scaling up through the 2030s and 2040s. The coalition will work on four main areas: (1) provide visible and transformative leadership that can shift the industry consensus, increase understanding of what is possible, and raise ambitions; (2) develop a shared knowledge base of integrated decarbonization pathways to enable alignment and critical mass that can help shift the entire sector; (3) invest in analytics to focus on the fuels, ships, market drivers, and policies necessary to make the transition to commercially viable and scalable ZEVs possible through technology, safety, economic incentives, and regulation; and (4) catalyze demonstrations, pilot projects and tests that can show the viability of different technologies, leverage best practices and inform investment decisions and regulations to speed up the deployment of ZEVs.

Three Percent Club. A coalition of countries, businesses and institutions, calling themselves the Three Percent Club, have announced their commitment to a 3% annual global increase in energy efficiency across their economies and businesses. Energy efficiency offers a potential 40% of the emission reductions needed to meet global climate goals, according to information from the UN.

At its launch, the new Three Percent Club includes 15 governments (Argentina, Colombia, Denmark, Estonia, Ethiopia, Ghana, Honduras, Hungary, India, Ireland, Italy, Kenya, Portugal, Senegal and the UK) and 13 businesses and international organizations (Alliance to Save Energy, Danfoss, EDP – Energias de Portugal S.A., Enel, Johnson Controls, LeasePlan, Saint-Gobain, Signify, Thermo King, Trane, World Resources Institute, Global Green Growth Institute, and Inter-American Development Bank). 

New study evaluates CEO commitments to sustainability

Despite these contributions, a study released at the Summit by Accenture and the UN Global Compact, a special initiative of the UN Secretary-General that works with companies to align their operations and strategies with 10 universal principles in the areas of human rights, labor, environment and anti-corruption, reports that CEOs say business contribution to the UN’s Sustainable Development Goals (SDGs) is not on track. The SDG has set a target of 2030 to address global challenges, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. The study draws on insights from more than 1,000 CEOs and the UN Global Compact Progress Report 2019, which surveyed nearly 1,600 companies from over 100 countries, and, according to the UN Global Compact, forms the most comprehensive research to date on business contribution to the 2030 Agenda for Sustainable Development.

The study finds that only 21% of chief executives believe business is playing a critical role in contributing to the global goals, and less than half (48%) are integrating sustainability into their business operations. Despite pockets of progress and innovation since 17 SDGs were agreed to in 2015, the report says that socioeconomic, geopolitical and technological uncertainties over the past four years have distracted CEOs’ sustainability efforts.

There are some positives, however. The report shows that 99% of CEOs surveyed say sustainability is critical to the future success of their organization, and 81% of companies are taking action to progress the global goals. Over 200 companies surveyed have approved science-based targets for climate action and a similar number have made commitments to reduce their greenhouse gas emissions to net-zero by 2050. Furthermore, 63% see technology as a critical accelerator of the socio-economic impact of their companies.

However, these commitments are failing to deliver the tipping points required to achieve the SDGs, concludes the report, as CEOs say that business execution is not measuring up to the size of the challenge or previous levels of corporate ambition. Over a quarter (28%) cite “absence of market pull” as a top barrier to sustainable business, and over half (55%) say they face a key trade-off in the pressure to operate under extreme cost-consciousness while seeking to invest in longer-term strategic objectives. Just 44% of CEOs believe a net-zero future is on the horizon for their company in the next 10 years.

Despite these challenges, nearly three-quarters (71%) of CEOs believe that with increased commitment and action, businesses can play a crucial role in contributing to the global goals. To accelerate progress, the report identifies three critical requirements specified by CEOs. First, an urgent need to raise corporate ambition within their own organizations to prioritize action against the 17 SDGs. Second, the need for business, governments, regulators and non-governmental organizations to come together to shape realistic, technology-enabled, science-based solutions to the global challenges. Thirdly, redefining responsible leadership to help business to be a leading driver of the SDGs.

For companies to progress towards a more sustainable future, the report summarizes what CEOs highlight as the needed leadership qualities that are critical for success: an alignment of sustainability with their core business strategy, operations and investments in innovation and technology; engaging their broader business and technology ecosystems to find collective solutions to the SDGs; and a personal commitment to sustainability.

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